A Check-up on BC’s New Employer Health Tax

Not long after being elected to form a government, the BC NDP tabled its September 2017 budget update. Included in that update was a commitment to do away with BC’s Medical Services Plan (“MSP”) premiums within four years.

Budget 2018 arrived on February 20, 2018. Minister of Finance, Carol James, announced that MSP premiums would be eliminated effective January 1, 2020 with the foregone tax revenue being offset by a new payroll tax: The Employer Health Tax (“EHT”). The EHT comes into force on January 1, 2019 and, as such, a year of transition is upon us.

Out with the old

Historically, BC residents have paid MSP premiums based on their annual adjusted net income with an income of over $42,000 resulting in a premium of $37.50, monthly in 2018. Notably, this was a 50 per cent reduction from 2017 when an individual with a similar income paid $75.00 per month.

Indeed, the shift of the burden away from the individual taxpayer had begun.

In with the new

Whereas MSP premiums are levied on individual residents of BC, the EHT is imposed on a business’ payroll and this is done on calendar year basis.

Employers with BC remuneration of $500,000 or less in a calendar year are exempt from the EHT.

Employers with BC remuneration of $500,000 or more in a calendar year must register for the EHT and are liable for the tax as follows:

2.95% on payroll between $500,000.01 and $1,500,000 calculated as:

2.925% x (BC remuneration – $500,000)

1.95% on payroll greater than $1,500,000 calculated as:

1.95% x BC remuneration

For employers who will be liable for EHT, an annual online EHT return will be required

This means that, on a payroll of $1,000,000, the EHT is $14,625. A payroll of $1,500,000 yields an EHT of $29,250!

An EHT of this magnitude means that a business will also be required to make quarterly instalment payments on June 15, September 15, December 15 and March 31 with the final payment being accompanied by the annual return. In fact, any payroll greater than $600,000 will result in the requirement to remit quarterly.

An Employer Health Tax Calculator is available on the Government of BC’s website, here: https:// forms.gov.bc.ca/taxes/employer-health-tax-calculator/#gf_41

Important dates

Registration for the EHT begins January 7, 2019.

If you are required to make instalments in calendar 2019, you must register by May 15, 2019.

All other employers required to register must do so by December 31, 2019.

Employers must file and pay their first EHT return by March 31, 2020.

The transition period – 2019

While MSP premiums were reduced in 2018 in anticipation of their elimination, the fact that the MSP will remain in-place until January 1, 2020 means that some employers may be liable for both the MSP and EHT for calendar 2019.

Talk with your advisor

Businesses should consider how they may be affected by the EHT in 2019 and plan accordingly. The factors involved are complex. However, your Lohn Caulder advisors are here to help you navigate through this transition, learn the rules and avoid unnecessary surprises.

Please contact Graham Caulder of our office if you have any questions regarding above information. Graham’s email address is grahamc@lohncaulder.com, and his direct line is 604-408-3074.